The coffee was extremely hot, much much hotter than it should have been - 185 degrees, a temperature which is "unfit for human consumption" according to McDonald's and is hot enough to cause full-thickness (3rd degree) skin burns in as little as two seconds. Their justification was that people buy coffee intending to consume it later, at home or at the office, despite the fact that their own research indicated otherwise. If the coffee had been at a temperature that was fit for consumption, she wouldn't have had 6% of her skin literally burned and destroyed all the way through.
The woman attempted to settle with McDonald's for just medical costs of $20,000, but they would only go as high as $800.
The *jury* awarded her $200,000 compensatory damages and then decided another $2.7 million in punitive damages to punish McDonald's. The judge reduced the total to $640,000, but on appeal the woman agreed to settle for a currently undisclosed amount of less than $600,000.
http://en.wikipedia.org/wiki/McDonald's_coffee_case
http://www.centerjd.org/free/mythbusters-free/MB_mcdonalds.htm
http://www.atla.org/PressRoom/FACTS/frivolous/McdonaldsCoffeecase.aspx